August 24, 2017
Ericsson's new Chief Technology Officer Erik Ekudden has given a strong signal that his 5G focus will be on developing enterprise rather than consumer applications as the ailing Swedish vendor looks for growth opportunities in a shrinking market for network equipment.
During an interview with Light Reading, Ekudden, who became Ericsson's CTO last month, urged stakeholders to pull together on driving 5G in a different direction from previous network technologies. (See Ericsson Designates Erik Ekudden as New CTO.)
"We have an opportunity to use new technologies in the 5G area for a different business from previous generations, which were predominantly for consumers," he said when asked what his priorities were in the CTO role. "But we need to foster collaboration and partnerships to make sure this opportunity becomes real."
The remarks seem a further indication that Ericsson AB (Nasdaq: ERIC) believes 5G could be far more lucrative in the enterprise sector than as a higher-speed mobile broadband technology for consumers.
They come just a few weeks after Arun Bansal, the boss of Ericsson's businesses in Europe and Latin America, said that 5G would not trigger much increase in operator spending unless new "industrial use cases" led to an uptick in sales. (See Ericsson: 5G Unlikely to Kickstart Telco Spending.)
Bansal reckons European operators are more interested in taking a long-term view of 5G as an enterprise service, while a handful in North America and Asia are immediately focused on using it as a substitute for fixed-line broadband technologies in the residential market. This largely explains why Europe is often perceived to be lagging America and Asia on 5G, he says.
Set to arrive in the market in 2019, the first 5G standard should support much higher-speed connectivity than today's 4G networks. But subsequent flavors of the technology are expected to deliver additional benefits -- including a reduction in latency, or network delay -- that could open up fresh opportunities in vertical markets such as the automotive and healthcare sectors. (See 3GPP Approves Plans to Fast Track 5G NR.)
Huawei Technologies Co. Ltd. and Nokia Corp. (NYSE: NOK), Ericsson's two biggest rivals, are also eyeing network opportunities in the enterprise sector of the market. But while those companies aim to serve enterprise customers directly, Ericsson recently said it would build new enterprise market business opportunities using only two key channels: its telco customers and strategic partner Cisco Systems Inc. (Nasdaq: CSCO). (See Ericsson Denies Ditching the Enterprise Market and Nokia to Create Standalone Software Biz, Target New Verticals.)
Back in late 2014, Ericsson said it would aim to generate between a fifth and a quarter of its revenues from non-telco customers by 2020, up from about 10% in 2013. But the company has failed to increase sales from this level, it revealed in its 2016 annual report, and is not currently disclosing any revised targets.
Sales and profitability at Ericsson have taken a pummeling over the past year as the company wrestles with fierce competition from Huawei and Nokia and a downturn in the market for radio access network equipment. (See Ericsson Shares Slump on Gloomy Q2 Update.)
Under CEO Börje Ekholm, who took charge of Ericsson at the beginning of this year, the vendor is now focused on restoring profitability. An immediate objective is to reduce annual operating costs by 10 billion Swedish krona by 2018. Ericsson also aims to double its 2016 operating margin to 12% by 2019.
Earlier this month, Swedish press reports suggested Ericsson was looking to slash about 25,000 jobs from its managed services business and various in-country operations. Such a move would eliminate about 23% of the overall headcount, but Ericsson has yet to issue any formal statement about staffing cuts. (See Ericsson Plans 25,000 Job Cuts – Report.)
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Light Reading. Ekudden was speaking to Light Reading as Ericsson published a new paper on some key technology trends that he expects to shape the communications sector in the next few years. Chief among them is what Ericsson calls "the dawn of true machine intelligence," which could have ramifications for all parts of a telco's business. "Over the last 18 months there has been an increase in the importance of learning systems and true machine intelligence," says Ekudden. "There is a great opportunity in terms of efficiency gains and cost savings when it comes to the operation of network infrastructure." While Ekudden expects automation to have a "near-term" impact in this operations area, he downplays concern that jobs will disappear as new technologies are introduced. (See The Automation Taboo: Let's Talk About Jobs.) "Operators around the world have a need for people to work in new areas like IoT [the "Internet of Things"] and a common theme is about redeploying the workforce," he says. "So a combination of more advanced operations and machine intelligence allows operators to address new business opportunities in the enterprise space." Before becoming Ericsson's group CTO, Ekudden led the Swedish vendor's technology strategy from California, where he also worked as the CTO of its Americas business. — Iain Morris, , News Editor, Light Reading
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